NatFoods puts SPC ambitions on hold

Page Tools

Dairy group National Foods has put merger talks with SPC Ardmona
on hold until it deals with the $1.6 billion takeover bid from New
Zealand giant Fonterra.

Australia's largest listed dairy company announced yesterday it
had suspended merger discussions with the Victorian canned fruit
company - a move welcomed by Fonterra which repeated its view the
merger was not in shareholders' interests.

National Foods managing director Peter Margin said yesterday the
company could not complete the due diligence investigations of SPC
before its own reply to Fonterra's bid was ready.

However, Mr Margin, speaking at a shareholders' meeting in
Melbourne, said that, if the Fonterra deal fell through, "we will
re-engage with SPC".

NatFoods' statement to the Australian Stock Exchange yesterday
said that the board "support unanimously the strategic and
financial rationale for a merger with SPC Ardmona".

SPC asked for a trading halt in its shares yesterday pending a
statement. It was unchanged at $1.78 before the halt.

Fonterra, which owns 19 per cent of NatFoods, on October 28
launched a $5.45-a-share cash offer for the company that values it
at $1.6 billion.

The offer is conditional on NatFoods dropping the bid to merge
with SPC launched last month. Fonterra wants NatFoods to remain a
dairy consumer business.

NatFoods expects to complete its Target's Statement in reply to
the Fonterra bid within a couple of weeks. The document will state
what NatFoods thinks its shares are worth.

Mr Margin and chairman David Crawford both strongly condemned
the Fonterra offer as inadequate, and shareholder opinion on the
floor backed them all the way.

Mr Margin said Fonterra could expect to create synergies of at
least $40 million through the takeover.

This would include savings through the reduction of the sales
force and administration staff, and benefits such as the transfer
of intellectual property in dairy production. Mr Margin said there
were "plenty of other people knocking on the door" of NatFoods, but
declined to give details. "We are not relying on a white knight,"
he said.

Fonterra chairman Henry van der Heyden said yesterday Fonterra's
offer represented a 21 per cent premium on the average broker price
target for NatFoods of $4.49.

"The cash offer includes a premium of 16.7 per cent over
National Foods' closing price on October 27 - the day before our
launch - and 12 per cent above the shares' all-time record high
closing price," he told a business forum in Auckland.